STEP Client Advisory & Consultation 2 — Questions and Answers
Question 1: A practitioner discovers mid-consultation that a client's stated goals conflict with the interests of a beneficiary the client is also seeking advice about. What is the most appropriate first step?
- Proceed if the conflict seems minor
- Disclose the conflict and obtain informed consent or decline to act for one party (Correct answer)
- Advise only the primary client without disclosure
- Refer the beneficiary to the same firm
Correct answer: Disclose the conflict and obtain informed consent or decline to act for one party
STEP ethics require disclosure of conflicts of interest and either obtaining informed consent or ceasing to act for one of the parties.
Question 2: When advising an elderly client who may have diminished capacity, which action best protects both the client and the practitioner?
- Proceed if the client can sign documents
- Document capacity assessments and consider involving a medical professional (Correct answer)
- Defer all decisions to family members
- Refuse to advise clients with any cognitive concerns
Correct answer: Document capacity assessments and consider involving a medical professional
Documenting capacity and seeking medical input protects the vulnerable client and provides evidence that the practitioner acted appropriately.
Question 3: A married couple seeks joint estate planning advice. Midway through the process, the husband privately discloses information that creates a conflict with his wife's interests. How should the practitioner respond?
- Keep the secret and continue advising both
- Cease acting for both clients unless both consent to continued representation with the information shared (Correct answer)
- Continue advising only the wife
- Advise the husband to keep the information confidential
Correct answer: Cease acting for both clients unless both consent to continued representation with the information shared
When confidential information creates a conflict in joint representation, the practitioner must generally cease acting for both unless informed consent is given.
Question 4: Which factor is LEAST relevant when establishing a client's risk profile during an initial estate planning consultation?
- Client's attitude toward wealth transfer taxes
- Client's investment return expectations for trust assets
- The practitioner's personal investment philosophy (Correct answer)
- Client's tolerance for complexity in estate structures
Correct answer: The practitioner's personal investment philosophy
The practitioner's personal philosophy is irrelevant; the profile must reflect the client's own objectives, attitudes, and circumstances.
Question 5: A practitioner is advising a non-domiciled client on UK estate planning. The client asks whether they need to disclose overseas assets on their UK tax return. The practitioner is uncertain. What is the best course of action?
- Advise the client that overseas assets are never reportable in the UK
- Research the issue thoroughly or refer to a specialist before providing advice (Correct answer)
- Tell the client to ask their accountant only
- Advise disclosure is only required if assets exceed £1 million
Correct answer: Research the issue thoroughly or refer to a specialist before providing advice
Practitioners must not advise beyond their competence; researching or referring to a specialist is the required professional response.
Question 6: During a client advisory meeting, a practitioner learns that a client is planning to transfer assets to avoid a creditor claim. What is the correct response?
- Assist with the transfer if instructed by the client
- Advise the client of the legal risks and refuse to assist with a potentially fraudulent transfer (Correct answer)
- Proceed only if the transfer is structured as a trust
- Report the client to authorities immediately without further discussion
Correct answer: Advise the client of the legal risks and refuse to assist with a potentially fraudulent transfer
Practitioners must not facilitate transactions that constitute fraud on creditors and must advise the client of associated legal risks.
Question 7: What is the primary purpose of a 'letter of wishes' in the context of discretionary trust planning?
- To legally bind trustees to specific distribution outcomes
- To provide non-binding guidance to trustees on how the settlor wishes assets to be distributed (Correct answer)
- To replace the trust deed in directing trustee actions
- To satisfy mandatory statutory disclosure requirements
Correct answer: To provide non-binding guidance to trustees on how the settlor wishes assets to be distributed
A letter of wishes is a non-binding expression of the settlor's intentions that guides but does not legally obligate trustees.
STEP Client Advisory & Consultation 2
A practitioner discovers mid-consultation that a client's stated goals conflict with the interests of a beneficiary the client is also seeking advice about.
What is the most appropriate first step?